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TMI Blog2007 (8) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... amp duty purposes was Rs. 33,53,000. 2.Computation of long-term capital gain on sale of immovable property to Smt.Veena Saran has been made on sale consideration of Rs. 5,15,000, the market value of the property for stamp duty purposes was Rs. 7,87,107. 3.In Schedule-6 of the Balance Sheet attached with the Profit Loss Account the investment in Chintels House has been shown as under : Opening stock Rs. 66,91,978.39 Purchases Rs. 11,26,381.55 Sales Rs. 40,68,600.00 Closing stock Rs. 66,18,812.41 The closing stock as per above opening stock purchases and sales should have been Rs. 37,49,759.94. The increased valuation of the closing stock is not reflected in the Profit Loss Account as a profit." 3. According to the ld. CIT, the Assessing Officer did not consider these issues while passing the assessment order and completed the assessment in a routine manner. He considered the order passed on 31-3-2005 as erroneous insofar as it is prejudicial to the interest of revenue and issued a notice under section 263 of the I.T. Act on the assessee on 28-8-2006. One Sri Ajay Gup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Assessing Officer are only as a result of misappreciation of facts, firstly regarding alleged difference in the account of Chintels House, the ld. A.R. submitted that the ld. CIT has not considered the profit earned in Chintels House while arriving at a conclusion that stock shown in the balance sheet is of Rs. 66,18,812.41 and whereas as per working from opening stock and purchases and sales it is coming at Rs. 37,49,759.94. The ld. CIT has not considered the profit earned by the assessee on sale and purchase of flats in which the assessee is dealing as investment. If the profit earned is included, then closing stock shown in the Balance Sheet would tally. He tried to take us to various documents, filed in the Paper Book. Regarding applicability of section 50C of Income-tax Act, the ld. A.R. submitted that the ld. CIT has not considered the provisions of section 50C(2) inasmuch as the assessee has worked out capital gains on the basis of sale consideration shown by him in the sale deeds and the ld. Assessing Officer has accepted the same and did not consider it necessary to refer the property to the Valuation Cell. Once the Assessing Officer has consciously not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Thus, quantity-wise, year-wise and money-wise details of opening stock, purchases, sales, closing stock and their reconciliation with the Balance Sheet was not forthcoming even before us. We, therefore, consider that the order of the Assessing Officer was erroneous because all the figures which the assessee is required to reconcile regarding dealing in flats were not forthcoming even before us. On this issue, we confirm the order of the ld. CIT in setting aside the order of the Assessing Officer. 8. Regarding the issue relating applicability of section 50C(1)/50C(2), we are of the considered view that section 50C(1) is mandatory and creates a deeming fiction whereby the Assessing Officer is required to substitute the valuation shown by Stamp Valuation authority in place of sale consideration shown by the assessee in the sale deeds. In this regard, it would be pertinent to refer to sections 50C(1), 50C(2) and 50C(3) : "50C. Special provision for full value of consideration in certain cases. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stakes a claim that market value of the immovable property is less than the valuation shown by the Stamp Valuation Authorities, then the Assessing Officer may, if he so considers necessary, refer the property to the District Valuation Officer for determining the market value thereof. If this is so, then provisions of sections 50C(2) and 50C(3) would be applicable. Thus, where valuation done by the District Valuation Authority is more than the valuation done by the Stamp Valuation Authorities, then valuation done by the Stamp Valuation Authorities will be adopted as sale consideration in place of sale consideration shown by the assessee in the sale deeds, but where valuation done by the District Valuation Authority is lower than the valuation shown by the Stamp Valuation Authorities, then valuation shown by the District Valuation Officer will be adopted as sale consideration in place of actual sale consideration shown by the assessee in the sale deeds. It is statutory duty of the Assessing Officer to invoke section 50C(1) when facts on the record fairly suggest that valuation done by the Stamp Valuation Authorities is more than the sale consideration shown by the assessee in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown by the assessee. Hon ble Andhra Pradesh High Court in CIT v. G.K. Kabra [1995] 211 ITR 336 held that an incorrect assessment of facts or incorrect application of mind can be regarded as erroneous being orders passed without applica-tion of principles of natural justice or without application of mind. Hon ble Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 held that the Assessing Officer is required to make further enquiries before accepting the submissions made by the assessee in the return. Hon ble Allahabad High Court in Swarup Vegetable Products Industries Ltd. v. CIT [1991] 187 ITR 412 held that the CIT can set aside the assessment if he is satisfied that further enquiry is necessary. Hon ble Madras High Court in K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 held that when the ITO is expected to make an enquiry on a particular item and if he does not make an enquiry as expected then that will be a ground for the Commis-sioner to interfere under section 263. The ld. A.R. has relied on the decision of Hon ble Rajasthan High Court in CIT v. Mangilal Didwania [2006] 286 ITR 126 . In that case, the Tribunal was satisfied that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely loss to the revenue that is contemplated under section 263. It must be prejudicial to the revenue administration. Of course, loss of revenue is prejudicial to the interests of revenue. The non-application of mind by the Assessing Officer and ignoring settled principles of law in the matter of computation of income and resultant assessment order is certainly erroneous and preju-dicial to the interests of revenue both in terms of loss of tax and in terms of prejudice to the Revenue Administration [ Panchaman v. CIT [2006] 283 ITR 50 (Ker.)]. The word "prejudice" must be judicially examined. What constitutes prejudice to the revenue has been subject-matter of judicial debate. One view is that it does not mean loss of revenue. The expression is not to be construed in a petty fogging manner but must be given a dignified construction. The interests of revenue are not to be equated to Rupees and Paise merely. There must be some grievous error in the order passed by the Income-tax Officer which might set a bad trend or pattern for similar assessments which, on a broad reckoning, the Commissioner might think to be prejudicial to the revenue administration. [ Bismillah Trading Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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